Last year, Governor Christie’s treasurer chided the non-partisan Office of Legislative Services for overly optimistic tax estimates. On Tuesday, the OLS gets to return the favor.
When the Senate Budget Committee convenes Tuesday, Republican Treasurer Andrew Sidamon-Eristoff, who has been consistently conservative in his revenue estimates for the first two years of the Christie administration, will have to explain why he is projecting the equivalent of an 8.7 percent increase in revenue in the fiscal year that begins June 30 – a robust $2.2 billion “New Jersey Comeback” that is not only the most optimistic revenue projection in the country, but twice as large as most other states are expecting.
Meanwhile, David Rosen — the OLS budget director who was excoriated by Republican legislators last year for his “reckless and irresponsible” prediction that revenues would be a mere $400 million more than Sidamon-Eristoff expected — will get to play the role of the responsible fiscal conservative asking what Kool-Aid the treasurer has been drinking.
Christie and Sidamon-Eristoff have stood by their projection that tax revenues will rise $2.2 billion over and above the $375 million cost of the first stage of an across-the-board 10 percent income tax cut and a second year of business tax cuts, enabling the governor to increase funding for pensions, school aid, and an array of social service programs.
Just three days after Christie’s February 21 budget speech, Standard & Poor’s, the ratings agency, issued a report asserting that “the economic assumptions that underlay the state’s revenue forecast appear to be optimistic based on current and projected economic conditions at the state and national levels.”
S&P credit analyst John Sugden-Castillo also noted that the Christie administration would be walking a fiscal tightrope because it allocated almost half of its $588 million, leaving just $300 million — less than 1 percent of the budget — to “offset revenue shortfalls” if tax collections come up short.
Those tax collections will come up shorter by much more than $300 million if the Facing Our Future report issued by a bipartisan task force that included former Republican and Democratic state treasurers, cabinet officers and academics is correct.
The bipartisan team assembled by the nonprofit Council of New Jersey Grantmakers projected that state revenues would rise by only $1 billion (or 3.4 percent ) under their “slow to moderate” growth scenario, and just $1.28 billion (or 4.4 percent) under their “moderate to aggressive” scenario. Even under their “moderate to aggressive” growth scenario, the Facing Our Future team does not expect revenue growth to exceed 6.5 percent until Fiscal Year 2016, much less the 8.7 percent effective growth rate that the Christie administration is projecting for upcoming Fiscal Year 2013.
The Facing Our Future revenue projections were put together by Richard Keevey, the former director of the nonpartisan Office of Management and Budget who served under both Republican and Democratic governors, and do not include the $375 million cost of Christie’s tax cuts.
So if the Facing Our Future report is right, Christie and Sidamon-Eristoff would be overestimating Fiscal Year 2013 revenues by $1.5 billion to $1.8 billion.
The respected Nelson A. Rockefeller Institute of Government at the State University of New York Albany, revised its own projections for state government revenue growth two weeks ago after reporting that fourth-quarter revenue growth had slowed nationally in the fourth quarter of 2011.
Republicans and Democrats will be watching closely Tuesday to see how high Rosen will be willing to go in his revenue projections Tuesday, when both he and Sidamon-Eristoff present their revenue analyses to the Senate Budget Committee.
While Democratic legislative leaders wanted higher revenue estimates than Christie wanted last year, both sides actually share a common interest in strong revenue numbers this year because both sides are anticipating using $1.4 billion in projected revenue growth over the next four budgets to pay for major tax cuts.
While Christie is proposing a 10 percent income tax cut in all tax brackets, Senate Democrats led by Senate President Stephen Sweeney (D-Gloucester) are calling for a 10 percent property tax credit on state income taxes up to $10,000 for taxpayers earning up to $250,000 — which would amount to a maximum $1,000 tax cut in Fiscal Year 2017 when the plan is fully phased in.
Christie’s income tax cut, which is also phased in through Fiscal Year 2017, would provide a tax cut of just $80.50 to families earning $50,000, but it would translate into a $7,265.75 income tax cut for millionaires — which led Democrats to attack Christie’s plan as a “tax cut for the rich.”
Meanwhile, Assembly Democratic leaders, with Assembly Majority Leader Lou Greenwald (D-Camden) serving as point man, have proposed a 20 percent property tax credit on state income taxes up to $10,000 – a maximum tax cut of $2,000 by Fiscal Year 2017 — paid for partly through a millionaire’s tax that would hike the state’s top income tax rate from 8.97 percent to 10.75 percent for New Jersey’s 16,000 millionaires.
That would be the same top rate imposed by former Democratic Gov. Jon Corzine and a Democratic-controlled legislature at the height of the Great Recession of 2007-2009. Christie has twice vetoed similar legislation and has vowed to do so again, leading Sweeney to leave the millionaire’s tax out of his tax cut proposal despite majority support for the idea in a series of polls over the past six months.
Christie has declared Greenwald’s plan “dead on arrival,” but has praised Sweeney’s plan, insisting that it is similar to his own because both would provide a net $1.4 billion cut in income taxes for New Jerseyans. Sweeney rejects that comparison as invalid because his proposal is linked to property taxes, rather than income tax rates, and because it provides all of its tax savings to families making under $250,000, while more than half of Christie’s total tax savings go to the top 2 percent of New Jersey taxpayers.